When would the NCA intervene in a transaction?
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A concentration can raise competition concerns if the parties are competitors and/or if they operate at different levels within the same value chain. However, in order for the NCA to intervene, the NCA must prove that the transaction will significantly reduce competition in the market.
If the concentration is likely to trigger concern, it may be reasonable to carry out a feasibility assessment. The purpose is to identify competition law risk at an early stage of the transaction process, and the analysis can often be reused while working on the merger notification.
COMPETITORS
Transactions between competitors:
The parties are competitors if they are active in the same market (horizontal overlap). Please note that for the purpose of this assessment, all companies in the same company group are relevant.
Usually, a concentration does not raise any issues if the parties have a low combined market share (less than 20%).
If the parties' combined market share exceed 20%, the market is considered to be "affected" by the transaction. In such cases, several requirements are set for the content of the merger notification, however, it does not imply that the transaction itself will be prohibited.
Further, transactions resulting in a high combined market share (around 40%) may raise competition concern, as the high market share could indicate that the implementation of the transaction will have anti-competitive effects. However, a high market share does not necessarily mean that the NCA will object to the transaction.
- In addition, transactions may be prohibited when the parties combined market share is low. This could be the case if the parties are close competitors or the target company is a "challenger" in the market.
VERTICAL RELATIONS
Transactions between parties at different levels within the same value chain
The parties are vertically related if they are active at different stages within the same value chain, for example as a manufacturer and a distributor. Please note that for the purpose of this assessment, all companies in the same company group are relevant.
As vertical restraints are generally less harmful than horizontal restraints and they may provide substantial scope for efficiencies, the risk of intervention on the basis of market shares is lower compared to the transactions between competitors.
Usually, a concentration does not raise any issues if the parties' combined market share is below 25%.
If the parties' market share exceed 30%, the market is considered to be "affected" by the transaction. In such cases, several requirements are set for the content of the merger notification, however, it does not imply that the NCA will prohibit the transaction.
Competition concerns can only arise if there is insufficient competition at one or more levels of trade, i.e. if there is some degree of market power at the level of the supplier or the buyer or at both levels. A concentration can reduce competition in the downstream market (e.g. if the manufacturer does not offer products or services to competitors or increasing the prices) or the upstream market (e.g. if the supplier only purchases from its own business and thereby reduces the competitors' customer base).